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The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.

Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village.

Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue.

Marc Faber, publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.”

Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai.

Dubai Times a Thousand

Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.”

China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off.

Risk for Commodities

Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. Retail sales during last week’s Lunar New Year holiday rose 17.2 percent from the same period in 2009, according to the Ministry of Commerce.

While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets.

In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009.

Bidding Up Prices

“If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd.

The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history.

Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data.

Bridge of Strength

Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin, a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd., the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International.

Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview.

Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported.

Real Estate or Soybeans?

Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia, 25 kilometers (15 miles) outside the existing municipality of 1.5 million people.

Mark Mobius, meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.”

Chris Ruffle, who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.”

Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans.

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The United Arab Emirates’ Central Bank stands behind local and foreign banks operating in the country and made an additional liquidity facility available to them, it said in an e-mailed statement today.

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Bank of England policy makers maintained consensus on the size of their bond-purchase plan this month, postponing a debate on the need for more spending until officials produce economic forecasts in November.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, unanimously voted to keep the program at 175 billion pounds ($286 billion) and to leave the benchmark interest rate at a record low of 0.5 percent.

“There were differences of view among members of the committee on the balance of risks to the medium-term outlook for inflation and how it had shifted in recent months,” the minutes of the Oct. 8 meeting showed today in London. “All committee members, however, agreed that recent developments were not sufficiently compelling to justify revising the target level of asset purchases.”

King and David Miles had pushed for more spending in August, when forecasts showed that the inflation rate may not return to the 2 percent target in two years. King said yesterday that the outlook for consumer prices is volatile and that policy makers would look beyond the short term to determine how much spending the economy needs.

The pound extended gains against the euro and the dollar after the minutes were published. Britain’s currency rose 1.2 percent to 90.16 pence per euro as of 10:10 a.m. in London, and 1.3 percent to $1.6577.

November Forecasts

“The forecast round ahead of the November inflation report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August,” the minutes said payday loans with no fax.

The central bank should pause its bond-purchase program next month after Britain probably emerged from recession, the National Institute for Economic and Social Research said today. Gross domestic product will probably increase 0.7 percent in the last three months of the year, Niesr said.

While the U.K. economy may have returned to growth in the third quarter, policy makers have signaled that the recovery may be uneven. The statistics office will probably say Oct. 23 that the economy grew 0.2 percent in the July-September period, according to the median of 33 economists forecasts in a Bloomberg News survey.

Policy makers said that higher asset prices, lower short- term interest rates and the weakness of the pound would help economic growth in the future. London home sellers raised asking prices to a record high this month and led gains across the U.K., Rightmove Plc said Oct. 19.

The bond purchases had probably helped contribute to improvements including a narrowing of spreads, the minutes said.

“The evidence suggested that the effect on asset prices had been of the type that the committee had anticipated when it launched the program and had been substantial,” the minutes said. “The impact of the recent rises in asset prices would be to support spending, but only if sustained.”

The next policy decision is due on Nov. 5.

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U.S. consumers plan to spend 3.2 percent less this holiday season from a year ago as they shop for deals at discounters and buy fewer gifts for non-family members, according to a survey.

Shoppers plan to spend an average $682.74, compared with $705.01 last year, according to the National Retail Federation, a Washington-based trade group. Last year’s decline was 7.6 percent, compared with the 9 percent increase shoppers had projected going into that shopping season.

This will be the holiday season of “the serious bargain- hunter,” the trade group said in a statement today. The NRF reiterated its own prediction for a 1 percent decline in holiday sales, a forecast that is based on unemployment rates and retail sales.

Forty-three percent of respondents said discounts will be the most important factor in deciding where to shop, compared with 40 percent a year earlier. Seventy percent said they would shop at discounters, similar to the previous year.

Spending on family members will drop 2 percent, while for friends and co-workers, it will decline 17 percent and 15 percent, respectively, according to the survey.

U.S. holiday sales may decrease for the second year as consumers stick to budgets and retailers cut prices to encourage spending, the NRF said earlier this month.

Sales for the last two months of the year will probably fall 1 percent to $437.6 billion from the same period in 2008, the NRF forecast Oct. 6. That’s not as steep as last year’s decline of 3.4 percent, the first drop since the NRF started tracking holiday sales in 1995. The highest U.S. unemployment in 26 years, stagnant wage growth and wavering consumer confidence will reduce spending, the NRF said.

Today’s findings are based on a national survey of 8,431 adults contacted from Sept. 30 to Oct. 7. The survey has a margin of error of plus or minus 1 percent. It was conducted for the NRF by Worthington, Ohio-based BIGresearch LLC.

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India’s economic growth accelerated for the first time since 2007, indicating the global recession’s impact on Asia’s third-largest economy is waning.

Gross domestic product expanded 6.1 percent last quarter from a year earlier after a 5.8 percent rise in the previous quarter, the Central Statistical Organisation said in New Delhi today. Economists forecast a 6.2 percent gain.

India joins China, Japan and Indonesia in rebounding as Asian economies benefits from more than $950 billion of stimulus spending and lower borrowing costs. India’s recovery may stall as drought threatens to reduce harvests and spur food inflation, making it harder for the central bank to judge when to raise interest rates.

“The weak monsoon has complicated the situation for the central bank,” said Saugata Bhattacharya, an economist at Axis Bank Ltd. in Mumbai. “Poor rains will hurt growth and stoke inflationary pressures as well.”

India’s benchmark Sensitive stock index maintained its declines today, dropping 1 percent to 15755.33 in Mumbai at 11:12 a.m. local time. The yield on the key 7-year government bond held at a nine-month high of 7.43 percent, while the rupee was little changed at 48.86 per dollar.

Before the rains turned scanty, the Reserve Bank of India on July 28 forecast the economy would grow 6 percent “with an upward bias” in the year to March 31, the weakest pace since 2003. It also raised its inflation forecast to 5 percent from 4 percent by the end of the financial year. The key wholesale price inflation index fell 0.95 percent in the week to Aug. 15.

‘Recovery Impulses’

The central bank’s Aug. 27 annual report said withdrawing the cheap money available in the economy would heighten the risk of weakening “recovery impulses,” while sustaining inexpensive credit for too long “can only increase inflation in the future.”

As the global recession hit India, the central bank injected about 5.6 trillion rupees ($115 billion) into the economy, which together with government fiscal stimulus amounts to more than 12 percent of GDP.

China’s economic growth accelerated to 7.9 percent last quarter from 6.1 percent in the previous three months, aided by a 4 trillion yuan ($585 billion) stimulus package and lower borrowing costs. China and India are the world’s two fastest growing major economies.

Interest Rates

The Reserve Bank of India kept its benchmark reverse repurchase rate unchanged at 3.25 percent in its last monetary policy statement on July 28 and signaled an end to its deepest round of interest-rate cuts on concern that inflation will “creep up” from October. The next policy meeting is scheduled for Oct. 27.

Manufacturing in India rebounded to 3.4 percent growth in the quarter ended June 30 after shrinking 1.4 percent in the previous three months. Mining rose 7.9 percent compared with 1.6 percent while electricity growth almost doubled to 6.2 percent during the period, today’s statement said.

India’s move to a higher growth trajectory is on course, Ashok Chawla, the top bureaucrat in the finance ministry, told reporters in Mumbai.

Drought or drought-like conditions has been declared in 278 districts in India, or 44 percent of the nation’s total, as rainfall has been 25 percent below average so far in the four- month monsoon season that started June 1, the farm ministry said Aug. 27.

Harvests Hit

Morgan Stanley economist Chetan Ahya and Nomura Securities Co. economist Sonal Varma said the drought will trim farm production though its impact on industry and services will be limited. Services including banking and software make up 55 percent of India’s $1.2 trillion economy, while industry accounts for a quarter.

“The lagged impact of monetary and fiscal policy action, improved business confidence in view of increased political stability, and recovery in external demand should ensure that the growth acceleration is sustained,” Ahya said.

India’s industrial production in June gained 7.8 percent from a year earlier, the fastest pace in 16 months, the government said Aug. 12.

Ahya expects the economy to grow between 5.2 percent and 5.8 percent in the year to March 31. That pace of expansion is attracting overseas companies including Harley-Davidson Inc., the biggest U.S. motorcycle maker. The U.S. economy shrank at a 1 percent annual rate last quarter.

New Factories

Harley-Davidson said last week it plans to start sales in India from next year.

Steel Authority of India Ltd., the nation’s second-largest steelmaker, said this month that demand for so-called flat products, mainly used to make automobiles, is rising and increased their prices by 900 rupees, or 3.4 percent, a ton.

Volkswagen AG, Toyota Motor Corp. and other car manufacturers have announced plans to spend more than $6 billion through 2012 to build factories in India to offset slumping demand in their home markets.

“Economic growth in India is still very good,” said Jnaneswar Sen, vice president in the Indian unit of Honda Motor Co., Japan’s second-largest carmaker. Honda plans to increase production in India by 50 percent from next month in response to rising demand.

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Federal Reserve Chairman Ben S. Bernanke said about 25 financial companies may be deemed too big to fail and subjected to additional oversight by the central bank under the Obama administration’s proposed regulatory plan.

Twenty-five is a “very rough guess,” and “virtually all of those firms” are already subject to umbrella supervision by the central bank, Bernanke said in response to a question from Representative John Campbell, a California Republican, during a House Financial Services Committee hearing today. He didn’t identify any of the companies.

Bernanke separately said the central bank’s emergency lending programs — such as to the commercial-paper market and to American International Group Inc payday loans. — are declining in size.

“We are currently as you know winding down our 13(3) programs, so I don’t anticipate they will be approaching the previous peaks,” the Fed chief said in response to a question. “I can’t anticipate what kinds of situations might arise,” he also said.

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European Union finance ministers said it’s too soon for governments to reverse stimulus measures as the region’s economy struggles to pull out of the worst recession since World War II.

“We haven’t reached the time yet at which the exit strategy could be applied. We’re still in the middle of the crisis,” Luxembourg Finance Minister Jean-Claude Juncker said after leading a meeting of euro-area counterparts in Brussels late yesterday. EU Monetary Affairs Commissioner Joaquin Almunia said “this is not the moment” to remove the stimulus.

The remarks reinforce the view of the Organization for Economic Cooperation and Development that the euro area will be mired in a recession for the rest of the year. The Paris-based group cut its 2009 forecast for the region last month, even as it raised its outlook for the global economy for the first time in two years.

Juncker said the global financial turmoil may cut potential output in the euro area from 2.2 percent to less than 1 percent from 2009 to 2010. The decline “will be all the greater if the determined collective measures of governments are not strong enough,” he said.

While it may not be time to withdraw stimulus, officials still need to start discussing plans as a “clear exit strategy” will help confidence, said Almunia, who attended the meeting of finance ministers.

‘Not So Easy’

Other finance ministers also said that risks to growth remain. Spain’s Elena Salgado said that a return to growth this year “is not so easy to achieve,” though some signs of recovery will emerge and expansion will resume in 2010.

Earlier this month, European Central Bank President Jean- Claude Trichet said that economic activity this year “is likely to remain weak, but should decline less strongly than was the case in the first quarter.”

Both Juncker and Almunia downplayed the threat of deflation in the euro area, where consumer prices fell 0 cash advances.1 percent in June, recording their first annual decline. The ECB aims to keep inflation just below 2 percent.

“Over the medium term, we’ve got inflation solidly anchored around the ECB’s forecast,” Almunia said. “The majority of the prices within the price basket will continue to grow. We believe also that wage trends do not suggest that deflation is just around the corner.”

OECD Outlook

The ECB started buying 60 billion euros ($84 billion) of covered bonds yesterday, its latest effort to ease credit tensions and encourage lending, after leaving its benchmark interest rate at a record low of 1 percent earlier this month.

While European economic confidence rose to the highest in seven months in June, and a measure of manufacturing is also improving, unemployment is continuing to rise, which will weigh on consumer spending.

The OECD sees the euro-region economy shrinking 4.8 percent this year, it said on June 24, cutting a March forecast for a 4.1 percent contraction. At the same time, it said the combined economy of its 30 member nations will shrink 4.1 percent this year and grow 0.7 percent in 2010, compared with a previous projection for contractions of 4.3 percent and 0.1 percent.

Officials’ efforts to staunch the slump are weighing on public finances and have pushed some countries over the EU’s deficit limit of 3 percent of gross domestic product. Ministers will set a timeframe today for Hungary, Lithuania and Poland to bring their budget gaps to within the limit, having already set deadlines for Ireland, France, Spain and Greece.

“Lower potential growth and a lower output gap will constrain the room for maneuver for our fiscal policies in the near future,” Almunia said. Officials should aim “not to create further imbalances when designing how to get out of this crisis.”

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The European Central Bank will keep interest rates at a record low for more than a year and may yet need to expand its use of unconventional tools as it battles the worst recession since World War II, economists said.

ECB officials meeting in Luxembourg today will leave the benchmark rate at a record low of 1 percent, according to all but two of 60 economists in a Bloomberg News survey. The central bank, led by President Jean-Claude Trichet, may keep the rate there until the fourth quarter of 2010, a separate survey shows.

The ECB last week lent banks a record 442 billion euros ($621 billion) for 12 months at its key rate in the hope they will pass on cheaper credit to companies and households. It will also start buying 60 billion euros of covered bonds this month to encourage lending. Trichet may today unveil further details of the plan, which was a compromise after policy makers failed to agree on a package twice that size.

“The ECB is pretty much done with cutting rates,” said Guillaume Menuet, an economist at Bank of America-Merrill Lynch in London. “However, they are very concerned about credit developments. If there is no improvement by October, the debate about expanding the asset purchases will resurface.”

The ECB, which holds Governing Council meetings twice a year away from its Frankfurt headquarters, announces its rate decision at 1:45 p.m. and Trichet holds a press conference 45 minutes later.

Close to Zero

The central bank for the 16-member euro region has been reticent to follow the examples of the U.S. Federal Reserve, Bank of England and Bank of Japan, which have lowered their main rates to close to zero and are buying government and corporate bonds to reflate their economies.

The ECB, whose key rate is still the highest among the Group of Seven nations, has focused instead on getting credit flowing through the banking system again, arguing that two thirds of its economy is financed by banks.

Even so, loans to households and companies in the euro area grew at the slowest pace on record in May as the recession crimped demand for debt and prompted banks to tighten credit standards.

While the ECB’s measures have stabilized the banking sector, “they have not, at this stage, succeeded in pushing credit into the real economy,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London instant payday loan. That could be achieved by buying corporate bonds, he said.

Original Plan

The ECB initially considered a package of asset purchases worth 125 billion euros that included corporate bonds and commercial paper, according to people briefed on the talks. Germany’s Axel Weber opposed buying assets of any sort. Other ECB officials, such as Athanasios Orphanides from Cyprus, have said more may need to be done to temper the risk of deflation.

Consumer prices fell 0.1 percent in June from a year earlier. That’s the lowest inflation rate Europe has seen since 1953, according to Royal Bank of Scotland. The ECB predicts the euro-region economy will contract about 4.6 percent this year.

“The primary goal should be to restore economic growth as fast as possible,” ECB council member Ewald Nowotny said at a conference on June 16. “It is necessary to use all possible means to secure a recovery,” he said in a June 19 interview, adding he expects interest rates to stay on hold into 2010.

Inflation Concern

Some policy makers are more worried that the stimulus being provided by central banks and governments will sow the seeds of future inflation. Deflation risks “are extremely limited,” ECB Executive Board member Juergen Stark said June 25. The bank will “swiftly” withdraw additional liquidity when the economy improves, he said.

There are signs that the worst of the recession may be over. The contraction in Europe’s services and manufacturing industries is slowing and confidence in the economic outlook rose to a seven-month high in June.

“The economy certainly won’t prompt any more ECB action for now,” said Aurelio Maccario, chief euro-area economist at Unicredit Group in Milan, who expects the ECB to keep rates on hold until the end of 2010. “However, if credit flows don’t start improving, Trichet will have to put his thinking cap on again in a few months.”

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The number of Americans filing for initial unemployment insurance rose unexpectedly last week, to the highest level in more than a month, according to government data released Thursday.

There were 627,000 initial jobless claims filed in the week ended June 20, up 15,000 from a revised 612,000 the previous week, the Labor Department said.

The number was above the consensus estimate of 600,000 from economists surveyed by Briefing.com.That’s the highest level of initial claims since the week ended May 16, when 636,000 were filed.

Despite the increase, economist Ian Shepherdson of High Frequency Economics said he still believes "the underlying trend in claims is downwards, but it is slow and uneven."

The 4-week moving average of initial claims was 617,250, up 500 from the previous week’s revised average of 616,750.

Continuing claims: The government said 6,738,000 people continued to file unemployment claims in the week ended June 13, the most recent data available.

That’s up 29,000 from the preceding week’s revised 6,709,000 ongoing claims payday advance lenders.

The 4-week moving average of continuing claims fell to 6,759,750, down 3,250 from the prior week’s revised average of 6,763,000.

State-by-state data: In the week ended June 13, the most recent data available, 14 states reported that initial claims decreased by more than 1,000.

Michigan had 5,414 fewer initial claims, which a state-issued comment attributed to fewer layoffs in the automobile industry.

A total of 6 states reported new claims increased by more than 1,000. Florida reported the most new claims, at 8,383, which a state-supplied comment attributed to layoffs in the construction, trade, service and manufacturing industries.

Have you exhausted your unemployment benefits? We want to hear about your experiences. E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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Bank of America CEO Ken Lewis heads to Capitol Hill on Thursday, and he’s likely to be grilled by lawmakers about the government’s role in ensuring that the bank complete its controversial merger with Merrill Lynch.

According to e-mails released Wednesday that pull back the curtain on heated negotiations, Federal Reserve Chairman Ben Bernanke had suggested to another Fed official that "management is gone," if BofA managers tried to flee the deal and later on needed further government assistance.

The revelations come thanks to congressional subpoenas demanding that the Fed disclose e-mails related to Bank of America’s purchase of Merrill. CNNMoney.com acquired copies of some of the e-mails circulated among House Republicans late Wednesday.

Lewis is the sole witness of a House Committee on Oversight and Government Reform hearing Thursday about the BofA-Merrill deal titled "Bank of America and Merrill Lynch: How Did a Private Deal Turn into a Federal Bailout?"

He is expected to be asked specifically about whether the Federal Reserve and other government officials pressured Bank of America (BAC, Fortune 500) into completing the merger even after BofA realized how badly Merrill Lynch’s fourth-quarter losses would be.

The BofA-Merrill Lynch deal was valued at $50 billion when it was announced in mid-September — the same day that Lehman Brothers declared bankruptcy. But the deal’s worth dropped to $19 billion after Bank of America’s shares plunged in following months.

Regulators eventually agreed to give BofA $20 billion in new capital and $118 billion in asset guarantees to cover possible losses tied to the transaction.

Lewis told investigators in the New York Attorney General’s office earlier this year that he felt his job was on the line if he didn’t go through with the deal. Once Lewis learned last December of Merrill Lynch’s deterioration, he told then Treasury Secretary Henry Paulson that BofA was considering backing out of the deal, according to his testimony to investigators.

Paulson said that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis’ job at the behest of Fed chief Ben Bernanke absolutely free credit report.

According to a Dec. 21 e-mail released Wednesday, Bernanke called BofA’s threat to pull out of the deal a "bargaining chip," saying "we do not see it as a very likely scenario."

In another e-mail, Federal Reserve Bank of Richmond President Jeffrey Lacker said that Bernanke considered Bank of America’s threat to pull out "irrelevant" and "not credible."

Lacker added that Bernanke "also intends to make clear that if they play that card and they need assistance, management is gone," Lacker wrote. BofA is based in Charlotte, N.C., which is in Lacker’s district.

The series of e-mails and other documents released Wednesday also called into question the notion that Merrill Lynch’s last hope laid with the BofA deal. It appeared that the Fed was willing to provide support to Merrill in order to avoid another collapse like Lehman Brothers.

In one document that listed contingency plans for Merrill if BofA decided to abandon the merger, the Fed said that there were "emergency liquidity provision actions that could be taken to provide some time for the sale/disposition of [Merrill Lynch] businesses and assets."

A Federal Reserve spokeswoman declined to comment on the e-mails.

Bank of America spokesman Lawrence Di Rita said that while he wouldn’t comment on internal documents he hasn’t seen, he pointed out the unusually tense and crisis-mode environment that overshadowed the negotiations.

"Stepping back, though, it is important to remember the circumstances in which these discussions were taking place: a crisis in financial markets and in the economy generally," Di Rita said. "Serious people were working hard to make decisions to stabilize and improve the situation. In hindsight, it’s interesting to look at all of that, but we’re looking forward."

CNN Congressional correspondent Brianna Keilar contributed to this report. 

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